Pound price rises as U.S. recession fears deepen and BoE dovish shift looms
GBP/USD climbs as traders price in Fed and BoE rate cuts amid global recession concerns
The British pound rose to near 1.2850 against the U.S. dollar on Wednesday, extending its recovery from a recent low of $1.2708. The advance was fueled by growing investor concerns that aggressive protectionist policies by President Donald Trump could tip the U.S. economy into a recession. The U.S. dollar index (DXY) slumped to 102.00, reflecting risk-off sentiment and expectations of monetary easing by the Federal Reserve.
Tensions escalated after President Trump signed an executive order raising tariffs on China to 104%, intensifying the ongoing trade war. In retaliation, Beijing increased tariffs on U.S. goods by 34%, prompting analysts at JPMorgan to warn of global recession risks. Amid this backdrop, the probability of a Fed rate cut at the May policy meeting surged to 52.5%, up sharply from 10.6% a week earlier, according to CME’s FedWatch tool.
GBP/USD price dynamics (March 2025 - April 2025) Source: TradingView.
BoE under pressure as trade war threatens UK outlook
While the pound has benefited from U.S. dollar weakness, the UK economy faces challenges of its own. Analysts at Deutsche Bank anticipate a 50-basis-point interest rate cut from the Bank of England in May, citing survey-driven weakness in economic activity, financial tightening, and labor market concerns. Markets are now pricing in roughly 88 basis points of total BoE cuts by December.
The escalating trade war is expected to have indirect impacts on the UK as Chinese manufacturers seek alternative markets, intensifying global competition. Prime Minister Keir Starmer has pledged to use industrial policy to protect domestic firms. This week’s UK GDP and factory output data for February, due Friday, may further shape market sentiment on BoE policy direction.
As previously noted in our updates, the pound has remained sensitive to both U.S. monetary policy shifts and UK-specific headwinds. With the BoE potentially turning more dovish and global trade risks escalating, GBP traders are closely monitoring inflation data and central bank commentary for confirmation of next steps.
